Page 1 of 14

Business Rates Pilot Scheme 2019/20 Application Form This application form will be used to assess your application to pilot 75% business rates retention in 2019/20. Where relevant, further evidence to support points raised in this form may be included as an annex. Please note that authorities cannot apply to pilot 75% business rates retention as part of more than one application. Information provided in response to this application may be published or disclosed in accordance with the access to information regimes – these are primarily the Freedom of Information Act 2000 (FOIA), the Data Protection Act 2018 (DPA), the EU General Data Protection Regulation, and the Environmental Information Regulations 2004). The personal data you provide as part of this application will be held on a secure government system in line with the department’s personal data charter. Contact details will only be used for contacting you about your application or to update you on our work relating to local government finance reforms. For any questions relating to the application process, please email: Businessratespilots@communities.gsi.gov.uk. FAQs relating to applications will be published on the Government publications website at https://www.gov.uk/government/publications/75-business-rates-retention-pilots-2019-to-2020-prospectus

1. Application Contact Details Please include details of the lead pilot authority and lead official responsible for responding to any departmental queries relating to the pilot application.

a. Name of lead pilot authority Leeds City Council

b. Name of lead official Carolyn Jolley

c. Lead official job title Senior Financial Manager

d. Lead official email address Carolyn.jolley@leeds.gov.uk

e. Lead official contact phone number 0113 3787821

Page 2 of 14

2. Membership of the Proposed Pool Please list all authorities belonging to the proposed pilot pool below. The application cannot be considered valid unless all of the listed members have endorsed all parts of the application (see Annex A). You can insert/delete lines as needed. For the authority type box, please write down one of the following options for each participating authority: (1) Fire; (2) London Borough; (3) Metropolitan district; (4) County; (5) Shire District; (6) Greater London Authority; (7) Unitary Authority.

Authority name Authority Type

City of Bradford Metropolitan District Council Metropolitan District

The Metropolitan Borough Council of Calderdale Metropolitan District

Craven District Council Shire District

Hambleton District Council Shire District

Harrogate Borough Council Shire District

Kirklees Council Metropolitan District

Leeds City Council Metropolitan District

North Yorkshire County Council County

Richmondshire District Council Shire District

Ryedale District Council Shire District

Selby District Council Shire District

Scarborough Borough Council Shire District

The Council of the City of Wakefield Metropolitan District

City of York Council Unitary Authority

Page 3 of 14

3. Membership details and pooling arrangements Please answer all of the questions below using short and concise answers. Section 4 will allow you to outline your pilot proposal in more detail.

a. Have all members included in the pilot area endorsed all parts of this application?

(Please ensure that Annex A is signed by s.151 officer of each area and returned as part of the application to evidence this.)

Select one: (1) Yes (2) No

b. Do any members of the proposed pool belong to any other current pool?

(If ‘no’, please move to question 3.d.)

Select one: (1) Yes (2) No

c. If any members of the proposed pool belong to any other current pool, have other members of such pool been informed that the authority is applying to become a pilot as part of a different pool?

Select one: (1) Yes (2) No (3) N/A

d. Are there any precepting authorities that are not part of the proposed pilot area?

(If ‘yes’, please move to question 3.e.)

Select one: (1) Yes (2) No – Does not include Fire and Rescue

Authorities.

e. If there are any precepting authorities that are not part of the proposed pilot area, are these precepting authorities aware of this proposal?

Select one: (1) Yes (2) No (3) N/A

f. Are all members of the proposed pilot area willing to collaborate with MHCLG officials on system design of the new business rates retention system, sharing additional data and information, as required?

Select one: (1) Yes (2) No

Page 4 of 14

g. How does the pilot pool propose to split non-domestic rating income in two-tier areas?*

(F.ex. the pilot pool could propose to split the shares as in the current 50% business rates retention, or propose to test different kinds of tier split arrangements as part of the pilot.)

(*The department will use this information in regulations to designate a tier split for the pooled pilot area. In practice, the pilot pool will be given one overall tariff or top-up, and the members of the pool can agree to change the headline tier split.)

The proposed 75% pilot pool includes the two tier area of the county of North Yorkshire, with the County Council and seven shire districts. Our proposal in this area is to split the additional 25% of business rates income retained equally between the tiers in this area. Therefore the final tier split in the North Yorkshire area would be: -

North Yorkshire County Council 21.5%

The Shire Districts 52.5%

North Yorkshire Fire 1.0%

Our proposal follows careful consideration of the risk to the Pool brought about by increasing the shares of shire districts thereby increasing the chance of a safety net payment, set against the ability of shire districts to be able to transparently measure the success of increased retention within the Pool. Similarly the county’s understandable desire is to raise more of its income locally, but this has to be balanced with the inherent risk of reductions in income should the business rates tax base experience a downturn and the effect this may have on vital upper tier local services, such as adult and children’s social care.

This proposal, sharing the additional income equally between tiers, allows both member authorities and the Government to better understand the effect of greater retention. The other distributional mechanisms within the pool will insulate individual authorities from the most obvious risks and allow both tiers to share equally in the overall financial benefit as described in section 4 b) below.

In all other single-tier areas it is assumed that the 25% additional income will be retained by the unitary authority with the current 1% continuing to be passed to the relevant fire authority. Therefore the tier split in the unitary areas would be: -

Unitary Authorities 74.0%

West Yorkshire Fire 1.0%

Page 5 of 14

h. Do you propose to retain any of the additional 25% of retained business rates in an investment pot or similar and distribute this after 2019/20?

(If ‘no’, please move to question 3.j.)

Select one: (1) Yes (2) No

i. If any of the additional 25% of retained business rates are kept in an investment pot or similar, how will this be distributed after 2019/20?

Pool income will be shared out so that member authorities receive two thirds of the additional income generated through 75% business rate retention, the remaining third of additional income being retained by the Pool.

The funding that is retained by the Pool will be redistributed to projects that meet the Pool’s strategic aims:

Reducing Digital Isolation

Inclusive Growth

Culture, Sport and Major Events

Business Support, Trade and Investment

Enabling Housing Growth

Any financial benefit held within the Pool at 31st March 2020, that is committed in 2019/20 for future years’ expenditure shall remain under the authority of the Joint Committee until expenditure is either incurred or the Joint Committee agree to treat as “residual benefit”.

At the point that the Joint Committee disband, they will authorise Leeds City Council to make any residual payments (see Governance document Appendix 1, paragraph 9).

j. What is the anticipated income above baseline funding level for the pilot pool over 2019/20 (in £)?

There will be an estimated £71.3m in income above the baseline funding level for the pilot pool in 2019/20, of which £23.6m will be additional funding generated by the Pool being accepted as a 75% retention pilot. It is this £23.6m that authorities in the Region will be able to invest strategically to promote inclusive economic development and to support the financial sustainability of the member authorities.

Page 6 of 14

k. What is the business rates base of the proposed pilot area like and what is its relevance to the economic geography of the area?

(F.ex. you could describe the size and types of hereditaments in the area, business sectors relevant to the area, or the size of your business rates base in relation to baseline funding levels.)

The individual billing authorities within the proposed pilot have very different business rates tax bases both in terms of the types of business they accommodate and the range and distribution of the rateable values of hereditaments.

For example one authority relies for as much as 53% of its rateable value on retail establishments, whereas retail accounts for only 30% of the rateable value in two other authorities, one with a higher proportion of industrial properties in its area and the other being the most rural area in the proposed pilot area. Similarly the proportion of rateable value attracting the higher national multiplier is as high as 77% in one area but only 30% in another.

With the pool’s ability to bring these different authorities together combining rural and urban, highly commercial and industrial, and stretching across a functioning economic unit, the diverse tax base offers a further source of financial resilience in the context of what can be, at the individual authority level, a highly volatile income.

l. What pooling arrangements would the members of the pilot like to see if their application to become a pilot is unsuccessful?

If this application to become a pilot were unsuccessful the current member authorities of the Leeds City Region Business Rates Pool have indicated that they would like their existing pooling arrangements to continue.

The current member authorities of the North Yorkshire Business Rates Pool have also indicated that they would like their existing pooling arrangements to continue.

Selby District Council are not in a pooling arrangement which will continue if this application is not successful.

m. How would the pilot area deal with residual benefits/liabilities once the pilot ends?

Any residual benefits or liabilities arising in regard to the Pool’s one third share of additional income will be shared amongst all the members of the Pool in proportion to their two thirds share of the additional income received from the Pool.

Any residual benefits or liabilities arising in regard to the two thirds share of additional income apportioned to local authorities must be dealt with by the authorities themselves.

Page 7 of 14

4. Details of the pilot proposal Please explain how your proposal fulfills each of the below criteria for becoming a 75% business rates retention pilot in 2019/20 (as outlined in 3.2 of the ‘Invitation to Local Authorities in England to pilot 75% Business Rates Retention in 2019/20’). If relevant, you may reference answers provided in section 3 of this application form and use this section to provide more detail on the responses. Although there is no formal word limit for answers provided in this section, please be as concise as possible. a. How does the proposed pilot operate across a functional economic area? The proposed pilot area comprises both North and West Yorkshire, incorporating a varied geography with a diverse but complementary economy and business rates base.

The proposed North and West Yorkshire Business Rates Pool offers the opportunity to test 75% retention in a region made up of both unitary and two tier authorities, a total of 14 different organisations. This will enable Pool members and Government to test how to resolve the issues inherent in such an arrangement.

The proposed Pool area has a population of 3.1 million people and an annual economic output of £70.3 billion with 1.4 million jobs and 137,000 businesses. At almost 4,000 sq. miles it covers 8% of England, including the major cities of Leeds, York, Bradford and Wakefield, complemented by diverse and distinctive towns and extensive rural and coastal areas (including three national parks). The rich diversity of places within this region means that coastal, rural and urban areas can combine to be stronger together, more effectively delivering inclusive growth, supporting and encouraging businesses, trade and investment.

The proposed Pool represents a functional economic area within which 93.8% of residents also work within the area, drawing together a dozen travel to work areas identified by the Office for National Statistics (2011).

The North and West Yorkshire Pool would be enabled to deliver significant additional regional investment, with a continued focus on culture and sport, reflecting the economic importance of both these sectors to the direct visitor economy but also in making the region an attractive place for inward investment and improving quality of life. These objectives are very much aligned with the Government’s Northern Powerhouse Strategy, which seeks to boost local economies by investing in skills, innovation, transport and culture. Looking forward, the local authorities of the North and West Yorkshire region will continue to explore new opportunities to support the economic life of the region to deliver benefits including significant economic growth, major infrastructure development and growth in tourism.

As the LEP Review moves towards conclusion, increased collaboration between York, North Yorkshire and West Yorkshire will be at the heart of proposals. This reflects the economic reality that many places undertake a dual role, underpinning urban development whilst driving rural growth. The most successful regions include successful cities alongside vibrant rural economies. There are clear examples whereby North and West Yorkshire working together can accelerate and drive growth in both the urban centre and rural hinterlands. The key driver is to focus on areas where more, deeper collaboration will deliver a step change in performance.

The membership of the proposed pool is as follows: City of Bradford Metropolitan District Council, The Metropolitan Borough Council of Calderdale, Craven District Council, Hambleton District Council, Harrogate Borough Council, Kirklees Council, Leeds City Council, North Yorkshire County Council, Richmondshire District Council, Ryedale District Council, Scarborough Borough Council, Selby District Council, The Council of the City of Wakefield and City of York Council.

These authorities already have a wealth of experience of working together. A prime example of this is the Yorkshire Local Authorities working with Welcome to Yorkshire & Screen Yorkshire to demonstrate the value of the Yorkshire brand in attracting visitors, major events and major film and television production. The value of this partnership goes beyond the simple increase in visitors. The cultural offer across the region underpins the quality of life which plays such an important role in attracting and retaining business investment. Maintaining and building the ambition and sustainability of the sector is a critical driver.

Other examples of strong collaboration include: Major events, such as the coordination of the 2014 Stage 1 Tour de France Grand Depart, and the subsequent, highly successful Tour de Yorkshire road cycling races;

Page 8 of 14

The West Yorkshire and York Transport Fund which is targeted at enabling key development areas in the region; Projects supporting and coaching business start-ups and SMEs; and Inclusive growth in the region, incorporating internet connectivity and skills development.

The Authorities come from different pooling backgrounds and this varied experience will bring a different perspective to the pooling process. Whilst this pilot bid builds on the success of the 2018/19 Leeds City Region pilot we recognise that each region brings knowledge and skills that can be shared for the benefit of all.

The Leeds City Region Business Rates Pool, established in 2013/14, comprises: City of Bradford Metropolitan District Council, The Metropolitan Borough Council of Calderdale, Harrogate Borough Council, Kirklees Council, Leeds City Council, The Council of the City of Wakefield and City of York Council. In 2018/19 this Pool was selected as a 100% retention pilot. The Pool has used the additional pilot resources to support regional economic growth, retaining 50% of the additional growth and allocating to strategic regional projects. These have focused on: Inclusive Growth; Culture, Sport and Major events; Business Support, Trade and Investment; and Enabling Housing Growth. The pilot has also helped to improve financial stability in the member authorities, with the remaining 50% of additional growth used by members to build financial resilience and put in place longer term strategies to deliver improvement and transformation. Appendix 2, presented, as part of a wider report, to the Chief Executives of the LCR Pool member authorities, provides further detail of these benefits.

There has been a business rates pool in operation in North Yorkshire since 2014/15, building on successful collaboration between members for many years. The member authorities of this Pool are: Craven District Council, Hambleton District Council, North Yorkshire County Council, Richmondshire District Council, Ryedale District Council, and Scarborough Borough Council. North Yorkshire have demonstrated big ambition to reduce digital isolation, not only delivering 95% superfast broadband coverage but also securing investment to implement city centre broadband networks in 15 market town centres. This pilot bid offers the opportunity to widen this ambition: York is the United Kingdom’s first gigabyte city and Leeds City Region have been successful in developing a smart city approach. Collaboration to pilot new smart city approaches in market towns will position North Yorkshire as the United Kingdom’s most connected rural area.

For the purposes of this pilot bid, Selby District Council have opted to join the North and West Yorkshire proposed Business Rates Pool. Selby District Council have seen significant reductions in the rateable values of two of the largest power stations in England: Eggborough and Drax. As a result Selby District Council have operated within safety net since 2013/14. Given the mechanisms of pooling, this offers our proposed pilot the opportunity to demonstrate how both risk and reward can be dealt with in a business rates pool.

In summary, this North and West Yorkshire proposal gives the opportunity to pilot how the financial uncertainty and risks inherent in the business rates system can be managed across a wide economic area, both supporting financial stability in member authorities and enabling economic growth for the benefit of the region.

Page 9 of 14

b. How does the pilot area propose to distribute and use the additional 25% of retained

business rates growth across the pilot area?

All the additional growth generated within the North and West Yorkshire pilot area will initially be paid into the Pool to be used in accordance with the Governance Agreement attached to this application at Appendix 3. The measurement of additional growth will include an adjustment to equalise authorities’ different attitudes to risk in their assessment of the costs of appeals, allowing individual authorities to provide sufficiently for their appeals costs, but not allowing this to affect the calculations necessary for the funds made available to the Pool. In summary the additional growth will be distributed as follows: -

• The Pool will first make any safety net payments to authorities as calculated using the 95% safety net threshold. The Pool will also make payments to any authority that is worse off under the proposed 75% pilot pool than they would have been in the predecessor 50% retention pools so that this loss is fully recompensed. The Pool expects to share the cost of the substantial £4.6m safety net payment to Selby district, but are prepared to share this significant risk in order to maintain the functional economic unity of the area.

• Of the remaining additional growth, two thirds will be redistributed back to the member authorities to enhance their financial sustainability, supporting core budgets for services such as adult social care and children’s services and allowing investment to safeguard future improvements. The redistribution mechanism is described below.

• One third will be retained by the Pool to be distributed to regional and local projects that create further growth in North and West Yorkshire. In 2018/19 the Leeds City Region 100% retention pilot, with the assistance of West Yorkshire Combined Authority, put in place a formal application and assessment procedure to allocate available funds. It is proposed that this will be expanded to cover the area of the new North and West Yorkshire 75% retention pilot under the control of a Joint Committee of the authority leaders. The overarching aim of the proposed 2019/20 bid is to boost growth in the region and has identified five Strategic Aims: Reducing Digital Isolation; Inclusive Growth; Culture, Sport and Major Events; Business Support, Trade and Investment; and Enabling Housing Growth.

The mechanism for redistributing two thirds of additional growth to member authorities

The redistribution mechanism that will return two thirds of the additional growth back to member authorities is designed to both incentivise individual authorities to generate additional growth and to take account of the differing needs each authority presents.

Therefore half of the redistributed amount will be returned to authorities in proportion to the growth each authority has generated in 2019/20 and the other half will be distributed in proportion to population, the most significant measure of need in the last assessment carried out by Government in 2013/14.

The six unitary authorities are each treated as individual authorities with both tiers of local government in North Yorkshire being treated as a further single authority in the initial calculation described above, as shown in Appendix 3 attached to this document.

The funding returned to the North Yorkshire area will then be further split between the county and districts in the ratio 51:49 as this ensures that the two tiers will be equally rewarded in terms of overall revenue gain in the year. The 49% redistributed to the lower tier will be on the bases of growth achieved and population, again incentivising growth and reflecting need in the County. The 51% allocated to North Yorkshire County Council recognises the increased financial pressures of adult social care and children’s service that impact on upper tier authorities.

In addition to this redistribution of additional growth, the North Yorkshire districts will also pool and reallocate the levy payments they would have paid under 50% retention. The County will receive a 30% top slice of this funding to support its core services. The remaining pooled levy payments will be allocated between the districts based on growth achieved and Settlement Funding Assessment (SFA), again equally balancing incentive and need. SFA is used as the measure of need in this situation because the costs experienced by the districts vary greatly due to their different characters, from those with large towns, such as Harrogate and Scarborough, to those that are very sparsely populated, such as Craven and Richmondshire.

Page 10 of 14

c. How does the pilot area propose to arrange its governance for strategic decision-making around the management of risk and reward? How do the governance arrangements support proposed pooling arrangements?

The proposed Governance Agreement for a North and West Yorkshire 75% Retention Pilot is attached at Appendix 1. This Governance Agreement addresses how the Pool proposes to share and use additional business rates income and sets out the position of the affected precepting authorities. Further, it explains how member authorities will work together to manage risk and how any residual benefits or liabilities would be dealt with. The Pool’s proposal is also explained in more depth below.

The North and West Yorkshire Pool will benefit the individual members and further the aims of the region as a whole. The Pool will have two complementary objectives:

• To support regional economic growth by providing support to and working in collaboration with regional partners;

• To support the financial stability of the member authorities, both at an individual and a regional level.

The Pool will be led by a Joint Committee comprising representatives of the member authorities. The Joint Committee representation will be as follows:

Five representatives from West Yorkshire: City of Bradford Metropolitan District Council; The Metropolitan Borough Council of Calderdale; Kirklees Council; Leeds City Council; The Council of the City of Wakefield.

Four representatives from North Yorkshire: North Yorkshire County Council; City of York Council; Harrogate Borough Council; and Scarborough Borough Council, where Harrogate Borough Council and Scarborough Borough Council represent the other North Yorkshire Districts.

These voting rights within the Pool broadly recognise the relative financial contribution made by member Authorities.

The Pool will receive 25% of business rates income collected above the 75% baseline income collected by member authorities, which would previously have been paid to Central Government.

The additional income from this pilot will be shared out so that member authorities receive two thirds of the additional income generated through 75% business rate retention, one third in proportion to growth achieved and one third in proportion to population. The remaining third of additional income generated will be retained by the Pool.

The income retained by the Pool will be redistributed to projects that meet the following Strategic Aims:

• Reducing Digital Isolation

• Inclusive Growth

• Culture, Sport and Major Events

• Business Support, Trade and Investment

• Enabling Housing Growth

It is envisaged that the Joint Committee will appoint a group of officers to assess projects submitted to the Pool. In 2018/19 the Leeds City Region 100% Business Rates Retention Pilot requested West Yorkshire Combined Authority to design a Prospectus for Investment which was used as a basis for project selection. This has proved a successful process for bid selection and a similar method will be used if this bid is successful. The Joint Committee will give final agreement on bids identified as appropriate through the assessment process. As referenced in section 4 a), Appendix 2 provides a summary of the process and some of the successful projects in 2018/19. The bid for 75% Business Rates Retention in 2019/20 for North and West Yorkshire recognises that the objectives of the Pool should be widened to include Reducing Digital Isolation.

Page 11 of 14

Income redistributed to member authorities will be used to invest in financial stability, focusing on:

• Putting valuable local services on a more stable financial footing;

• Building financial resilience;

• Putting in place longer term strategies to deliver improvement and transformation

This will build on the successes already recognised by those authorities within the 2018/19 100% Pool Pilot. This includes: supporting social care budgets in 2018/19; contributing additional funds to reserves; and assisting with major projects which will provide economic benefits to the region once complete.

The provisions at Paragraphs 8 and 9 of the Governance Agreement aim to minimise the direct financial risk to member authorities of participating in this pilot. They represent a shared approach to managing the risk inherent in the business rate retention scheme, which will increase for local authorities as they are given more control over, and hence have a greater reliance on, locally raised funds.

As described above, the additional retention of regionally raised income will enable member authorities to manage internal risk through improved financial stability and greater capacity to invest in improvement and transformation for the longer term.

One of the authorities in this proposed pilot has been operating within safety net since 2013/14. This represents a very real direct financial risk to the Pool and the member authorities. A further risk is that authorities will fall below their business rates baseline and therefore experience a lower level of funding than they would under the 50% retention scheme. Our pilot demonstrates how financial arrangements can be created within the business rates pool to manage both of these significant financial risks. As explained in Question 4b) the proposed member authorities have agreed that this safety net payment is funded by the pooled income before redistribution occurs and that the Pool will also make payments to any authority that is worse off under the proposed 75% pilot than they would have been under a 50% arrangement. This ensures that no authority gains from the pilot until all authorities have at least the level of resources that would have been received under the 50% scheme.

Another significant risk associated with 75% retention and with any pilot remains the impact of successful appeals. Whilst authorities should bear some of this risk and it can be addressed to some extent through pooling mechanisms, we call on Government to push ahead with the early introduction of the necessary legislation to enable “tone of the list” appeals - i.e. where a ratepayer successfully argues for a reduction on the basis that their rateable value was too high at revaluation - to be managed through a central mechanism, as was proposed in Clause 2 of the Local Government Finance Bill 2016-17.

Once any losses in income arising through safety net losses and “no detriment” arrangements have been addressed, as defined in Paragraph 8 of the Governance Agreement, any residual benefits or liabilities arising in regard to the Pool’s one third share of additional income will be shared amongst all the members of the Pool in proportion to their two thirds share of the additional income received from the Pool. Any residual benefits or liabilities arising in regard to the two thirds share of income apportioned to local authorities are expected to be resolved by the authorities themselves without any additional support from the Pool.

A successful North and West Yorkshire bid to pilot 75% business rates retention will provide greater resilience against the potential adverse variation in business rates yields within the Pool in 2019/20.

Page 12 of 14

5. Submitting your application Please return this form and Annex A with signatures of all s.151 officers from proposed pilot pool’s member areas by the deadline of 25 September 2018. Where relevant, further evidence of points raised in this form may be included as an annex. Please submit your completed application to: businessratespilots@communities.gsi.gov.uk or Business Rates Reform; Local Government Finance; Fry Building, 2 Marsham St, Westminster, London SW1P 4DF.

Page 13 of 14

Annex A – Evidence of authorisation

a. Name of lead pilot authority Leeds City Council

b. Name of lead official Carolyn Jolley

c. Lead official job title Senior Financial Manager

d. Lead official email address Carolyn.jolley@leeds.gov.uk

e. Lead official contact phone number 0113 3787821

Please include the signatures of each member area’s s.151 officer to evidence that all parts of your application have been fully endorsed by authorities listed in section 2 of the pilot application form. You can insert/delete lines as needed. Authority name Name of s.151 officer Signature

City of Bradford Metropolitan District Council

Andrew Crookham

Director of Finance

The Metropolitan Borough Council of Calderdale

Nigel Broadbent

Head of Finance

Craven District Council Nicola Chick

Chief Finance Officer and Section 151 Officer

Hambleton District Council Louise Branford White

Director of Finance

Harrogate Borough Council Paul Foster

Head of Finance

Kirklees Council Eamonn Croston

Service Director, Finance and s151 Officer

Page 14 of 14

Leeds City Council Doug Meeson

Chief Officer Financial Services

North Yorkshire County Council

Gary Fielding

Corporate Director Strategic Resources (Section 151 Officer)

Richmondshire District Council

Sian Moore

Corporate Director (Resources) and Section 151 Officer

Sian Moore

Ryedale District Council Anton Hodge

Chief Finance Officer (s151)

Selby District Council Karen Iveson

Chief Finance Officer

Scarborough Borough Council Nicholas Edwards

Director of Business Support & S151 Officer

The Council of the City of Wakefield

Neil Warren

Chief Finance Officer

City of York Council Ian Floyd

Deputy Chief Executive and Corporate Director of Customer and Corporate Services

APPENDIX 1

NORTH AND WEST YORKSHIRE BUSINESS RATES POOL

GOVERNANCE AGREEMENT

1 Title

1.1 The North and West Yorkshire Business Rates Pool.

2 Membership

2.1 City of Bradford Metropolitan District Council, The Metropolitan Borough Council of Calderdale, Craven District Council, Hambleton District Council, Harrogate Borough Council, Kirklees Council, Leeds City Council, North Yorkshire County Council, Richmondshire District Council, Ryedale District Council, Scarborough Borough Council, Selby District Council, The Council of the City of Wakefield and City of York Council.

3. Commencement

3.1 This governance agreement comes into force on 1st April 2019 and will continue until the Pool is dissolved, either by Government or because any one of the members formally leaves the Pool (see “Dissolving the Pool”, below).

4. Rationale and Objectives

4.1 The North and West Yorkshire Pool exists to benefit the individual members and to further the aims of the North and West Yorkshire region as a whole. The Pool has two key objectives:

To support the financial sustainability of the member authorities, both at an individual and a regional level;

To support regional economic growth by providing support to and working in collaboration with regional partners, with a focus on the following themes:

o Reducing Digital Isolation o Inclusive Growth o Culture, Sport and Major Events o Business Support, Trade and Investment o Enabling Housing Growth

4.2 Member authorities will retain 75% of growth above business rates baseline income, with the remaining 25% being paid to government. The Pool will receive from members one third of the 75% of growth above business rates baseline income.

4.3 This Pool income will be shared out so that member authorities receive two thirds of the additional income generated through 75% business rate retention, one third in proportion to

their share of total growth achieved above the 75% baseline and one third in proportion to population, the remaining third of additional income being retained by the Pool. The only exceptions to this are set out in Section 8, below.

4.4 Any variation to the arrangements set out in 4.2 and 4.3, above, will require the formal agreement of the North and West Yorkshire Business Rates Pool Joint Committee.

5. Leadership and Accountability

5.1 The Pool will be led by a Joint Committee comprising of representatives of the member Authorities making up the Pool. Joint Committee representation will be as follows:

Five representatives from West Yorkshire:

City of Bradford Metropolitan District Council The Metropolitan Borough Council of Calderdale Kirklees Council Leeds City Council The Council of the City of Wakefield

Four representatives from North Yorkshire:

North Yorkshire City of York Council Harrogate Borough Council Scarborough Borough Council

5.2 The Joint Committee will direct expenditure and shall be responsible for:

Allocating any excess income arising from the one third Pool share as set out in 4.3 above; any changes to the purposes for which the income received by the Pool should be used, but

the principle that no authority should receive less than they would if not in the 75% Pool pilot, shall be maintained;

agreeing the expenses to be deducted by the lead authority administering the Pool; considering any applications for other councils to join the Pool; any variations to the membership of the Joint Committee; and any other matters relating to the administration and governance of the Pool including

replacement of the lead authority.

5.3 The members of the Joint Committee will elect a chairperson.

5.4 The Joint Committee will meet as and when required but no less than twice each year.

5.5 The quorum for the meetings will be no less than 5 members. Representatives of the member authorities will be able to nominate substitutes.

5.6 Member voting rights will be one vote for each member of the Joint Committee. Voting will be by simple majority. In the event of a tie, the chair of the meeting will have a casting vote.

5.7 The Joint Committee will be supported by officers drawn from the lead authority.

5.8 The Joint Committee may establish any sub-groups or any officer forums that they believe to be appropriate.

5.9 Minutes of Joint Committee meetings will be published as required by law.

6. Lead Authority

6.1 The initial lead authority responsible for the administration of the Pool shall be Leeds City Council.

6.2 The lead authority will normally act as such for a full year and may only be replaced at the year end. A lead authority wishing to relinquish the role at the financial year end (i.e. 31st March) must give a minimum of four months’ notice.

6.3 Each member of the Pool will be jointly and severally liable for any payments required to the Ministry of Housing, Communities and Local Government but, notwithstanding that, the lead authority will take responsibility for all matters in relation to the administration of the Pool including (but not limited to):

all liaison with MHCLG and other government departments including the completion of all forms and returns associated with the Pool;

administration of payments to and from the Pool and all calculations relating to the collection fund for the Pool;

producing an annual report showing how income has been distributed and preparing periodic monitoring reports for Pool members;

calculation of the costs of administering the Pool which are to be deducted from the rewards of the Pool. If the excess income generated by the Pool was insufficient to cover the administrative costs of the Pool in any year, then the shortfall would be shared between the Pool members in proportion to their spending baselines;

The lead authority will ensure that the pooling arrangements, annual reports and other financial information is published and is freely available on the lead authority’s website or elsewhere as appropriate.

7. Dissolving the Pool

7.1 This Pool may be revoked by Government after one year.

7.2 If any member decides to leave the Pool the regulations require that the Pool will be dissolved.

7.3 Any authority seeking to leave the Pool should inform MHCLG and all other members of the Pool as soon as possible. Once the Pool has been established, this must be by 30th September in any year, to allow the remaining members time to seek designation of a new Pool for the following year (see 7.5, below).

7.4 The lead authority will make the necessary calculations and submit the required returns associated with the dissolving of the Pool.

7.5 The remaining members of the Pool may choose to form a new Pool and, if they wish, include new members for the following year (subject to new designation by MHCLG).

8. Safety Net and ‘No Detriment’

8.1 The Pool will have a single safety net threshold set at 95% of its baseline funding level. Authorities not participating in pooling arrangements who suffer reductions in business rates income exceeding the safety net threshold would be entitled to safety net payments. If an authority is a member of a business rates pool, the safety net payment to that individual authority could be lost because the loss across the pool may not be as much as the 5% required to reach the safety net threshold.

8.2 Authority(s) that would otherwise have qualified for safety net(s) will have their share of Pool proceeds calculated so as to include what they would have received as a safety net payment. However in doing so, no Authority in receipt of a safety net payment shall financially benefit, taking all income streams into account, above what they would have received under the 50% retention scheme.

8.3 Authority(s) that would have been better off under the 50% retention scheme will have their share of Pool proceeds calculated so as to include what they would have received in a ‘no detriment’ arrangement, i.e. under the 50% retention scheme.

9. Treatment of Potential Losses in Income and Residual Benefits or Liabilities

9.1 There is also a risk that authority(s) participating in the Pool will be worse off as a result of their participation when compared with what their financial position would have been under the 50% Business Rate Retention Scheme, including receipt of Revenue Support Grant and Rural Services Delivery Grant.

9.2 Authority(s) that would have been better off under the 50% retention scheme will have their share of Pool proceeds calculated so as to include what they would have received in a ‘no detriment’ arrangement, i.e. under the 50% retention scheme.

9.3 Loss in income to Pool members in the circumstances set out above will be met proportionately from the Pool’s one third share of the additional income generated by the authorities within the Pool and the member authorities’ two thirds share of that income. If that income is insufficient then the net loss will be shared amongst all members of the Pool in proportion to their spending baselines for the year to which the safety net(s) would have applied.

9.4 Once such losses in income are resolved, any residual benefits or liabilities arising in regard to the Pool’s one third share of additional income will be shared amongst all the members of the Pool in proportion to their two thirds share of the additional income received from the Pool. Any residual benefits or liabilities arising in regard to the two thirds share of additional income apportioned to local authorities must be dealt with by the authorities themselves.

9.5 Any financial benefits committed in 2019/20 for future years’ expenditure shall remain under the authority of the Joint Committee until expenditure is either incurred or the Joint Committee agree to treat as “residual benefit” (see 9.4 above).

9.6 At the point when the Joint Committee ceases to exist, they will authorise Leeds City Council as the lead authority to make any remaining payments on their behalf.

Appendix 2

Report to Chief Executives - Leeds City Region (LCR) Business Rates Pool (31/08/18)

Leeds City Region Business Rates Pool: 100% Retention Pilot 2018/19

Members of the Leeds City Region Business Rates Pool bid successfully to pilot 100% business rates retention in 2018/19, resulting in estimated additional business rates income of around £41m being retained in the region.

The Leeds City Region 2018/19 Pilot has two complementary aims:

To support and enable regional economic growth; and

To improve financial stability in member authorities

Of the estimated gain to the LCR the Pool will retain 50% (£20.7m) to continue to support and enable regional economic growth. The other 50% (£20.7m) will be allocated to the member authorities themselves to improve financial stability within their authorities. Of the 50% allocated to member authorities, half will be based on each authority’s actual additional growth and half will be redistributed by population.

This briefing note outlines the Pool’s progress in achieving these aims and explains the development of our approach to allocating funds to regional projects.

Regional Economic Growth

The Business Rates Pool continues to build on more than a decade of successful economic collaboration and partnership, retaining a further 50% share of this additional growth income to continue to support and enable regional economic growth.

The aims identified in the 100% pilot bid included delivering significant additional regional investment, with a continued focus on culture and sport, reflecting the economic importance of both these sectors to the direct visitor economy but also in making the region an attractive place for inward investment and improving quality of life. These objectives are very much aligned with the Government’s Northern Powerhouse Strategy, which seeks to boost local economies by investing in skills, innovation, transport and culture.

Following the announcement by Government at the end of 2017 that Leeds City Region had been selected as a pilot to retain 100% of growth above the business rates baseline in 2018/19, a new and revised approach to project selection and fund allocation was developed to ensure the Pool monies contributed as fully as possible to the growth of the Leeds City Region economy and were invested in those projects which would create inclusive growth and contribute to the economic development and regeneration of the area.

In order to allow a revised approach to project selection and fund allocation a Prospectus for Investment was developed by the West Yorkshire Combined

Appendix 2

Authority, as a leading organisation in driving the region’s growth ambition. The Business Rates Pool Joint Committee agreed for the Prospectus to be designed around four, previously agreed, key strategic thematic areas: Culture, Sport and Major Events; Enabling Housing Growth; Business Support, Trade and Investment; and Inclusive Growth.

The Prospectus Specifications were developed and finalised through a policy led local authority workshop. This allowed full engagement with local authority partners and a set of co-produced specifications in the spirit of partnership and collaboration. The Prospectus was launched in April 2018 with bids selected by the Committee in July 2018. The selection criteria also aimed to put greater emphasis on the ability of projects to lever in further funding as well as those which would increase business rates in the future and improve the legacy for the Pool.

In 2018/19 estimated funds available to the Pool are £20.7m in-year income and £2.8m in balances brought forward from previous years, in total £23.5m. The successful bids fit into the themed areas accordingly:

Case Study 1: Expansion of digital engagement in Leeds

This project forms part of the member council’s wider digital inclusion programme, 100% DIGITAL LEEDS, which has an ambitious digital literacy plan to work with community organisations and partners to get people online. By enhancing digital skills for everyone, we can help people to access online services and get the best deals. We can improve digital resilience to help people progress in their existing roles, move into employment, or secure better jobs around the city and region. The project underpins the Council’s Inclusive Growth Strategy, which focuses on shaping a compassionate city that has a strong economy benefitting everyone; where inequality and deprivation is reduced; and which acts as a driver to local and regional economic growth.

Case Study 2: Inclusive Growth in the Leeds City Region – Skills, External Challenge & Connectivity

The Inclusive Growth project will improve the skills of those entering the workplace and ensure that a coordinated approach is taken to support business in understanding the benefits of apprenticeships. It will strengthen the links between schools and business and ensure that apprenticeships and technical education are

Percentage of funding, split according to strategic areaInclusive Growth 39%Culture, Sport and Major Events 34%Business Support, Trade and Investment 20%Enabling Housing Growth 7%Total 100%

Appendix 2

championed and promoted in schools. This is vital to accelerating productivity, competitiveness and economic prosperity across the region. The broadband aspect will tackle market failure and enhance digital inclusion by targeting investment to specific points in the network which have not received superfast broadband investment to date and are unlikely to in the near future. The project will therefore bring forward critical infrastructure to support both future business growth and wider economic growth.

Financial Stability in Member Authorities

The remaining 50% of additional income is being shared by the member authorities, 25% in proportion to the business rates growth achieved by that authority and 25% in proportion to population to ensure an element of regional redistribution of the gains realised through that business rates growth.

The Leeds City Region 2018/19 pilot bid proposed that the additional funds retained regionally would enable member authorities to invest in financial sustainability, with a focus on:

Putting valuable local services on a more stable financial footing Building financial resilience Putting in place longer term strategies to deliver improvement and

transformation

This intention has been borne out by the benefits noted by member authorities, summarised below.

1. Putting valuable local services on a more stable financial footing

Single tier authority members have largely focussed on using this 50% share to improve financial stability within their authorities by supporting and improving existing service provision. Members have used this additional funding to manage in year pressures predominantly against social care budgets but also waste collection, and towards social care investment and transformation.

For example, following an Ofsted inspection of Children’s Social Care Services, Wakefield Council recognised weaknesses in the quality of the service provided. The additional funding retained through the 2018/19 business rates pilot enabled the Council to respond positively to these findings and will support rapid improvement across children’s social care, including additional investment in leadership, management and capacity issues in front-line social work. Without the additional retained business rates funding, the Council would have been forced to draw on its limited reserves in order to fund the critical and immediate response.

As a further example, the additional business rates income received has supported the setting of a robust budget for Leeds. This has included the decision to increase

Appendix 2

the children’s social care budget by almost 8% in response to continuing demographic and inflationary pressures.

2. Building financial resilience

Member authorities have identified that the additional business rates income retained has assisted in building financial resilience, including the management of ongoing pressures. This recognises that, without the additional funding, further cuts to services would have had to be made or unplanned use of reserves needed.

For example, Calderdale have been able to use the additional income to contribute towards budgeted savings, therefore limiting any consequent impact on service provision or requiring a further call on reserves. Leeds have budgeted to use a proportion of this income to contribute additional funds to reserves. The reduced need to call on reserves in-year and the ability to sustain, and indeed budget to contribute to, reserves is a key aspect of members medium-term financial planning and longer term financial resilience.

3. Longer term strategies to deliver improvement and transformation

The member authorities have identified that investment in medium to long term strategies is key to improving financial sustainability in view of the uncertainty surrounding the national funding landscape post 2019-20.

City of York are considering use of the additional income to assist with delivery of major projects, which are expected to provide economic benefits to the region once complete. Whilst Harrogate have identified that part of the funding will be used to invest in their asset base to improve financial sustainability.

Kirklees have earmarked some of the additional funding from the pilot for social care investment and transformation and at Bradford there has been specific investment into Prevention and Early Help for Children’s Services.

In summary, the Business Rates Pilot builds on many years of successful regional collaboration, providing members and partners with the opportunity to further develop existing relationships and processes to help in the move towards powers, resources and decision-making being undertaken at the optimum level to deliver a growing, inclusive economy.

Appendix 3: North and West Yorkshire 75% retention pilot - 2019/20 Pool schedule calculating projected pool income and income to member authorities

Bradford Calderdale Kirklees Leeds Wakefield YorkNorth Yorkshire

AreaTotal

£ £ £ £ £ £ £ £

Under 50% retention

Forecast 2019-20 Non-Domestic Rating Income 133,867,197 56,244,642 103,419,613 361,340,022 125,772,679 101,915,671 207,839,948 1,090,399,772

Appeals adjustment -4,316 -93,286 -3,212,040 -9,148,485 -994,245 -2,133,227 -3,016,116 -18,601,715

Adjusted non-domestic rating income 133,862,882 56,151,356 100,207,573 352,191,537 124,778,434 99,782,444 204,823,832 1,071,798,056

Authority share (%) 49.0% 49.0% 49.0% 49.0% 49.0% 49.0% 49.0%

Authority share (£) 65,592,812 27,514,164 49,101,711 172,573,853 61,141,433 48,893,397 100,363,678 525,181,048

Adjustments

s.31 relief funding 8,553,552 3,655,144 6,650,679 10,300,023 4,681,497 2,383,113 11,932,447 48,156,455

TOTAL income under 50% scheme 74,146,364 31,169,308 55,752,389 182,873,876 65,822,930 51,276,510 112,296,124 573,337,502

less Business Rates Baseline 68,826,493 28,166,877 52,968,465 169,900,007 56,548,306 47,305,742 105,553,532 529,269,422

Growth (50%) 5,319,871 3,002,431 2,783,924 12,973,869 9,274,624 3,970,768 10,320,636 47,646,124

less estimated levies paid to the Pool 0 0 0 -1,438,431 0 -2,215,086 -5,084,207 -8,737,723

Total growth retained by Authorities 5,319,871 3,002,431 2,783,924 11,535,438 9,274,624 1,755,683 5,236,429 38,908,400

Under 75% retention

Forecast 2019-20 Non-Domestic Rating Income 133,867,197 56,244,642 103,419,613 361,340,022 125,772,679 101,915,671 207,839,948

Appeals adjustment -4,316 -93,286 -3,212,040 -9,148,485 -994,245 -2,133,227 -3,016,116

Adjusted non-domestic rating income 133,862,882 56,151,356 100,207,573 352,191,537 124,778,434 99,782,444 204,823,832

Authority share (%) 74.0% 74.0% 74.0% 74.0% 74.0% 74.0% 74.0%

Authority share (£) 99,058,533 41,552,003 74,153,604 260,621,737 92,336,041 73,839,008 151,569,635 793,130,562

Adjustments

s.31 relief funding 12,917,609 5,520,013 10,043,882 15,555,137 7,070,016 3,598,987 17,978,477 54,705,644

TOTAL income under 75% scheme 111,976,141 47,072,017 84,197,486 276,176,874 99,406,057 77,437,995 169,548,112 865,814,683

less "75% Business Rates Baseline" 103,942,051 42,537,733 79,993,192 256,583,684 85,399,483 71,441,325 159,360,917 672,917,151

Growth 8,034,091 4,534,284 4,204,294 19,593,190 14,006,574 5,996,670 14,883,377 71,252,481

Growth (75%) 8,034,091 4,534,284 4,204,294 19,593,190 14,006,574 5,996,670 14,883,377 71,252,481

Additional Growth generated by the Pool 2,714,220 1,531,853 1,420,370 6,619,321 4,731,951 2,025,902 4,562,741 23,606,358

less Safety net payments -4,613,910

Total Growth for redistribution 18,992,448

Growth retained by the Authorities 5,319,871 3,002,431 2,783,924 12,973,869 9,274,624 3,970,768 10,320,636 47,646,124

With 25% of Additional Growth paid to Authorities in proportion to growth achieved, 25% to Authorities in proportion to population, and 50% retained by the PoolPopulation 534,279 209,770 437,047 781,743 336,834 208,367 604,866 3,112,906

Total Additional Growth retained by the Pool 727,907 410,816 380,919 1,775,187 1,269,027 543,312 1,223,648 6,330,816

Net Gain to the Pool (after lost levy income) 727,907 410,816 380,919 336,756 1,269,027 -1,671,774 -3,860,559 -2,406,907

Growth retained by Authorities in proportion to that achieved 727,907 410,816 380,919 1,775,187 1,269,027 543,312 1,223,648 6,330,816

Growth retained by Authorities in proportion to population 1,086,580 426,616 888,836 1,589,856 685,030 423,763 1,230,135 6,330,816

Total Additional Growth retained by Authorities 1,814,487 837,432 1,269,755 3,365,043 1,954,057 967,074 2,453,783 12,661,632

Net Gain to Authorities (incl. levies saved) 1,814,487 837,432 1,269,755 4,803,474 1,954,057 3,182,160 7,537,990 21,399,355

Distribution within North Yorkshire Area Craven Hambleton Harrogate Richmondshire Ryedale Scarborough SelbyNorth Yorkshire

County

Population 56,308 90,537 156,312 53,732 53,486 107,824 86,667 604,866

Districts share by growth achieved 58,185 90,863 156,314 61,672 61,495 177,494 0

Districts share by population 56,416 90,710 156,611 53,835 53,588 108,030 86,833

Total Growth retained by Authorities in North Yorkshire 114,601 181,573 312,925 115,507 115,083 285,524 86,833 1,241,738